New Contributions to the Law of Property by Henry Smith: Realism, Numerus Clausus, and Custom– Yonathan Arbel

Post by Yonathan Arbel

Professor Henry Smith has recently published two new engaging and interesting papers in the area of property law, both part of different symposia. For the symposia lists of papers, see here and here, and for the papers, see here and here (citations at the bottom of the post).

The first is part of a symposium where the main question was the enduring appeal of doctrinal analysis in private law, despite the “we-are-all-realists-now” dominant point of view. There are many great contributions there, and Smith takes this question to the area of property. He makes a simple but strong argument: the most basic of property doctrinal categories (or modules)—property as a law of things, the centrality of possessory rights, and property law as a partly formal system—stands tall in the face of the realist onslaught because, far from being transcendental nonsense, they serve important social functions, namely, they serve as information heuristics for complex social situations.  Smith surveys changes to property law since the times of the realists and shows that wherever changes occur, they were around the edges of property, and that the basic categories were left largely untouched despite the impression one might get from reading purely academic works.

Some excerpts:

“[t]he Realists’ preferred picture of property—the bundle of rights—became the reigning dogma . . . . If any cluster of rights, privileges, immunities, duties, liabilities, and so on could be characterized as property, then there was no good reason why the bundle of sticks, reflecting the best of current thinking, should not be immediately and continuously implemented in the law. . . . This picture is too tidy in its untidiness.  . . . those aspects of property that the Realists saw as the greatest challenge to their program have been the most resilient . . . There is an irony in this. The Realists’ slogan was that an increasingly complex society required less formal and more contextual law . . . the “complexity” of modern society did not remove the need for a modular system. Rather, in some ways, it increased the need to manage the greater complexity of interactions through that very system.”

And

“In property law, things are the lynchpin of the architecture. . . .  it is the very complexity of the problem of horizontal interactions and its interpersonal nature that requires a method of making the problem more manageable. That method is to modularize the system, starting with the definition of legal things. . . . What [the Realists] could not abide was the notion of property as a law of things, because then it would be answerable to the everyday morality that tracks things, and to the considerations of system that thing-based modularity provide”

Regarding the difference between scholarly perceptions of realism and the law:

“More generally, much commentary is wildly out of sync with case law when it comes to the law of trespass. In the parallel universe of academic writings, it might be plausible to suggest that trespass should be subject to reasonableness balancing like fair use in copyright . . . But none of these ideas accords with the case law on the subject, and I predict none of them will come to fruition.”

One question here concerns Smith’s methodology. Smith carefully studies changes to property law and surmises from the durability of fundamental categories that they are functionally important and not simply nonsense on stilts made to look coherent through the use of “a euphonious collocation of letters” as the realist would put it.[1] The Realists, and to a larger extent, the Crits,  would argue, I believe, that legal change of property law fundamentals will only occur as a result of a corresponding change in the economic base (the Marxist/Althusserian “in the last instance”). Since that has not happened in the 20^th century, the lack of change is not indicative of the internal function of these categories but rather of their social, ideology-affirming value (the legal system is, for Althusser, an “Ideological State Apparatus” meant to reaffirm the basic State ideology). Of course, this reading is fraught with its own difficulties, but the methodological question is still of interest.

The second contribution is part of a special issue of the Iowa Law Review, covering the “The Spontaneous Order and Emergence of New Systems of Property” held at NYU’s Classical Liberal Institute. The question here is how decentralized systems of property evolve and create order that can be thought of as belonging to a general system.

Co-authored with Yun-chien Chang, Smith investigates the question of the numerus clausus principle, especially with reference to civil law countries. The paper packs many ideas and there are many ways to read this paper—as a theory of the evolution of property law, a critical analysis of the rhetoric of numerus clausus principle, a comparison and typology of the numerus clausus and numerus apertus (open list), a language theory of the law of property, and a generalization of the standardization theory of property law, to name but a few. As a result, what follows is a very rough simplification, and the reader is urged to read the paper itself.

At the core of the paper stands the argument that in civil law countries, where there is strict statutory limit on the creation of new property rights, courts are willing to accept new forms of property grounded in custom. However, the acceptance is not a carte blanche to new property forms; rather it is always done within the (implicit) framework of an informational cost-benefit analysis. Adding more forms is costly (for it might make verifying and measuring rights more complicated and involves administrative and system costs), and the benefit is declining (for the most useful, general forms of property tend to be the first ones to be recognized). As a result, there is some optimal amount of property rights. Civil law start with a background of too few forms of property, making custom an engine for growth, and common law starts with a background of too many forms of property, making it more important for courts to limit the growth of new forms. A case study here is the growing recognition of de-facto ownership of unregistered buildings in Taiwan, which courts were willing to recognize despite not meeting conventional property law requirements.

Importantly, the social and private incentive to create private forms of property diverges. Private parties will rarely care about the fact that by them creating a timeshare on a watch (to use one of their examples), any subsequent purchaser of watches will have to invest more time into checking whether this watch is on a timeshare. Hence, it will often be necessary to limit private freedom to create forms of property. Custom is an intermediary between private and public creation of forms of property, and they generalize four propositions that help determine whether custom will transform into formal law.

A final issue is their discussion of the relationship between the informational theory and extensiveness and intensiveness of messages created by property. A given unit of communication “effort” trades-off the scope of the audience with the nuance of the message. Large audiences, coming from different backgrounds and having divergent experiences and expectations, will require much more effort than close-knit communities. This linguistic theory applies to custom versus law, because it means that transforming custom (the law of close communities) to law, implies a certain loss of information in the process, which involves formalization, standardization, and simplification. As example, they discuss the issue of mining law and how its legalization had changed its definition of a mining spot, once known intuitively by miners.

This is an interesting paper and it is especially interesting what the authors do not consider. There is asymmetry in the law regarding creation and extinction of property forms. While there may be a strong pressure by litigants that property rights in unregistered houses or online property be recognized, there is very little pressure on writing off old doctrines that are no longer of use. Placing this dynamic within the framework presented here, implies that even in civil law countries there would be too many forms of property and that occasional centralized doctrinal culling may be required.

Citations:

Henry Smith, The Persistence of System in Property Law, 163 Univ. Pa. Law Rev. 2055 (2015).

Yun-chien Chang & Henry E Smith, The Numerus Clausus Principle, Property Customs, and the Emergence of New Property Forms, 100 Iowa L. Rev. 2275 (2015).

[1] Walton H. Hamilton & Irene Till, Property, in 11 Encyclopaedia of The Social Sciences 528, 528 (Edwin R.A. Seligman & Alvin Johnson eds., 1937)